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Friday, June 06, 2008

India's inflation jumped in the week ending 24th May to 8.24 percent, the fastest pace since August 2004, adding pressure on the central bank to raise interest rates. Wholesale-price gains accelerated for a seventh straight week, after increasing 8.1 percent in the previous week, the commerce ministry said in a statement in New Delhi today.

Reserve Bank of India governor Yaga Venugopal Reddy said yesterday that prospects of more food output this year and curbs on farm exports will boost supplies and help tame inflation, playing down chances of higher interest rates. Still, India's benchmark 10-year bond yield was unchanged at 8.23 percent, the highest in a year, after the inflation data. Inflation was mainly driven by higher costs of fuel, power and light, basic metals including steel and food grains.

India, which imports 70 percent of its oil, increased prices for gasoline by 11 percent, diesel by 9 percent and cooking gas by 17 percent after oil reached a record $135.09 a barrel in New York on May 22. India previously raised fuel prices in February, the first time since June 2006.

The changes in fuel prices announced on June 4 will be reflected in the inflation data due for release on June 20.

India's food grain production may increase to a record 227.3 million tons in the year ending June, helped by bumper rice, wheat and lentils output, the agriculture ministry said in April. It may receive an additional boost as rainfall in the four-month monsoon season that started last week is forecast to be adequate.

Foreign Exchange Reserves

India’s foreign-exchange reserves fell during the week ended May 30 by $1.6 billion to $314.6 billion, according to the Reserve Bank of India yesterday. This was the fifth week this year that this has happened, which is partly an indication that the pace of capital flows has slowed, and partly a reflection of the falling value of the rupee. Foreign-currency assets fell $1.3 billion to $304.9 billion. Gold reserves fell $225 million to $9.2 billion while its reserves with the International Monetary Fund dropped $4 million to $526 million.

The change in foreign-currency assets is partly because of changes in the value of the dollar against the euro, the yen and other currencies during the period, the central bank said.

India's foreign-exchange reserves, including overseas currencies, gold and special drawing rights with the International Monetary Fund, have increased $106.2 billion in the past year.

Meanwhile, money supply in India grew 22.5% in the two weeks ended May 23 from a year earlier, compared with 22% in the prior two weeks, the central bank data showed.

M3, which mainly comprises currency in public circulation, bank deposits and money invested in other saving plans, stood at Rs 40.8 trillion ($955.6 billion) on May 23, the Reserve Bank of India said.

Rupee

The rupee declined again this week on concern stock sales by overseas funds and rising oil prices will boost demand for foreign currency. The currency pared back last week's 0.6 percent advance as data from the capital markets regulator showed overseas investors sold more Indian shares than they bought on 11 of the past 12 trading days. The rupee also weakened on speculation quickening inflation, which erodes the value of the returns from investments in the currency, will prompt funds to sell more local assets.

The rupee dropped 0.5 percent to 42.665 per dollar this week as of the 5 p.m. close in Mumbai. This makes the rupee the worst performer at the moment among the 10 most-actively traded Asian currencies excluding the yen in the past month, with a 4.2 percent loss. The rupee has dropped 7.7 percent this year after gaining 12.3 percent in 2007, the most in more than three decades.

Funds based abroad sold a net $4.3 billion in Indian shares after buying a net $17.2 billion last year, according to the Securities and Exchange Board of India.

India's trade deficit widened to a record $25.4 billion in the December quarter, according to the central bank. The cost of oil imports rose to an all-time high of $8.03 billion in March, government data show. Crude oil prices almost doubled in the past 12 months.

Monday, June 02, 2008

India's export growth accelerated in April as companies shipped more gems, jewelry, oil and other manufactured products to overseas markets. Shipments were up 31.5 percent to $14.4 billion from a year earlier, faster than March's 26.6 percent gain, the government said in a statement in New Delhi today. Imports in April rose 36.6 percent to $24.3 billion, widening the trade deficit to an all-time high of $9.87 billion.

Exports to the U.S. rose 9.3 percent in the nine months to Dec. 31, slower than the 10.6 percent gain in the same period a year earlier, according to the latest breakdown of overseas sales released by the central bank. India gives a more detailed analysis of exports five months after releasing initial data.

Shipments to Europe rose 25.5 percent in the nine-month period, up from 16.2 percent a year earlier, the central bank said. Exports to Germany gained 29.3 percent and sales to the Netherlands were up 91 percent.

Emerging Economies

Our Personal Blogs

Claus and Edward's "Baker's Dozen"

Claus Vistesen and Edward Hugh are proud and happy to announce that they are now working as "featured analysts" with a new Boston-based start-up - Emerginvest.

Claus and Edward have used a new, updated, methodology in order to identify a group of 13 emerging economies which we consider are going to outperform both the rest of the emerging economy group and the OECD economies in terms of a number of key performance indicators over the 2008 - 2020 horizon.

Through our association with Emerginvest we hope to develop performance indicators which will confirm both the relevance and validity of the selection procedure adopted.

We would like to point out that we have absolutely no financial connection whatsoever with Emerginvest - although we do heartily endorse what they are trying to do.

In particular we see the move by the investment community towards emerging markets as one of the most effective and direct ways to address those issues of inter-country wealth and income imbalances which have plagued our planet for so long now - namely by getting the money from the rich who have it to the poor who need it.

Sending investment to emerging economies is also a way of addressing the underlying imbalances which exist between the relatively older populations of the developed economies who increasingly need to save, and the relatively younger emerging economies who can benefit from the investment of those savings in their countries. So in a way you can both ensure the future of your own pension and help attack poverty at one and the same time. This type of possibility is normally known in economics as "win-win".

The oldest known source and most probable origin for the expression "baker's dozen" dates to the 13th century in one of the earliest English statutes, instituted during the reign of Henry III (r. 1216-1272), called the Assize of Bread and Ale. Bakers who were found to have shortchanged customers could be liable to severe punishment. To guard against the punishment of losing a hand to an axe, a baker would give 13 for the price of 12, to be certain of not being known as a cheat. Specifically, the practice of baking 13 items for an intended dozen was to prevent "short measure", on the basis that one of the 13 could be lost, eaten, burnt or ruined in some way, leaving the baker with the original dozen.

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About Claus

Claus Vistesen is a 23 year old macroeconomist who is on the point of finishing his MSc in Applied Economics and Finance from the Copenhagen Business School. His primary research interests are international finance and international macroeconomics. Claus is especially interested in how the changing structure of global and national demographics impacts on local macroeconomic performance. Moreover - and as the wonk he ultimately is - he also takes a considerable interest issues and methodologies associated with econometrics, and this is an interest he intends to develop in his postgraduate research.

About Edward

Edward 'the bonobo' is a Catalan macroeconomist and economic demographer of British extraction, now based in Barcelona. By inclination he is a macroeconomist, but his deep-seated obsession with trying to understand the economic impact of contemporary demographic changes has often taken him far from home, off and away from the more tranquil and placid pastures of the dismal science, into the bracken and thicket of demography, anthropology, biology, sociology and systems theory. All of which has lead him to ask himself whether Thomas Wolfe was not in fact right when he asserted that the fact of the matter is "you can never go home again".

He is currently working on a book with the provisional working title "Population, the Ultimate Non-renewable Resource".